Can you get a personal loan with fair credit? Yes — here’s how

It’s possible to get a personal loan with fair credit — typically a FICO score that falls between 580 and 669. However, you’ll have to jump through more hoops than those with good or excellent credit. You may also have to shop around to find lenders that offer competitive personal loan rates for fair credit.

Can you get a personal loan with fair credit?

The short answer is yes, you can get a loan with fair credit.

You may have fewer lenders to choose from, as some require good or better credit, but it won’t be as difficult as getting a loan with bad credit. Remember that interest rates will be higher than those with good to excellent credit enjoy.

Most lenders use your FICO score to make lending decisions. Some use the VantageScore model.

These two credit scoring models have slightly different definitions of fair credit. Your lender may have its own definition of fair credit, too. But these ranges are a useful guideline.

How does fair credit affect a personal loan?

Lenders use your credit score to gauge your risk as a borrower — how likely are you to repay the debt as agreed? A fair credit score tells the lender you’ve had some challenges in the past and present a moderate degree of risk. Although some lenders offer fair credit loans, you should know what to expect if you apply for a loan with fair credit.

• Higher interest rates: The current average personal loan interest rate is 12.36 percent. But, as a fair credit borrower, you can expect to get an interest rate between roughly 18 percent and 32 percent, depending on the lender.
• Steeper fees: You may pay origination fees as high as 12 percent of your loan amount. Origination fees tend to be higher when your credit score is lower.
• Shorter repayment periods: Lenders typically offer shorter terms to fair credit borrowers, compared to good or excellent credit borrowers.
• Lower loan limits: Lenders may limit how much you can borrow with a fair credit score.

While fair credit can mean additional challenges, you may not be stuck with these unfavorable terms forever. Making consistent, on-time payments on your personal loan and other debts may increase your score. Then, you may be able to refinance your personal loan for a better interest rate.

How to get a personal loan with fair credit

When you’re ready to apply for a personal loan, following these six steps will help streamline the process.

1. Assess your needs. Use a personal loan calculator to determine how much you can afford to borrow. Add estimated origination fees to your loan amount if you need to take home a specific amount of cash — lenders typically deduct the fee when your loan funds.
2. Check your credit. Know where you stand before applying to avoid surprises. If your credit score is on the lower end of the fair spectrum, consider paying some credit card balances down. Even a slight increase in your score could get you better terms.
3. Pay down your current debt. If you can, pay off a few small balance debts before applying for a loan. Lenders look at your debt-to-income (DTI) ratio to determine how much of your monthly gross income is spent on monthly debt. Your DTI ratio is expressed as a percentage, and if it’s above 43 percent, you might not qualify for the amount you want.
4. Compare loan offers. Get prequalified with at least three lenders that cater to fair credit borrowers to gauge your likelihood of being approved. Prequalifying allows you to preview your rate without hurting your credit, as lenders only use a soft credit pull for this step.
5. Use a cosigner. You could improve your approval odds if you add a cosigner with strong credit and low levels of debt. You may qualify for a higher loan amount, lower rate or a longer term since the lender has the security of knowing an additional person is responsible for paying the debt.
6. Submit a formal loan application. Once you decide on the best loan offer, it’s time to complete the application. This part will require a hard credit check, so make sure your application is error-free and upload any required documents to avoid an inadvertent denial.

Where can I get a loan with fair credit?

You can get personal loans for fair credit through traditional banks, credit unions, online lenders and peer-to-peer lenders. Each type of lender has benefits and drawbacks.

• Traditional banks: Borrowers with good or better credit scores are most likely to qualify with a traditional bank. Check the requirements before applying to make sure you meet the minimums.
• Credit unions: You could get approved for a personal loan with a fair credit score if you’re a credit union member, because credit unions often give weight to preexisting banking relationships when making lending decisions. Federal credit unions cap personal loan interest rates at 18 percent, which may be lower than what online lenders offer.
• Online lenders: Qualification requirements at online lenders tend to be the most lenient, but they may charge interest rates as high as 36 percent with high origination fees.
• Peer-to-peer lenders: Peer-to-peer lenders present your application to individual investors who may have higher risk tolerances than traditional lenders. However, they also come with high borrowing costs, and the approval process can be slow.

How to decide if a fair credit loan is right for you

A personal loan makes sense if it helps you accomplish a financial goal. Since a fair credit score won’t earn you the lowest rates, it’s important to understand how it will help — or potentially hurt — your money situation.

For example, you can use it to consolidate high-interest credit card debt, which could improve your credit scores in the future. Or it might make sense to use a personal loan to replace an old air conditioner before the hot summer months to avoid a costly emergency repair scenario.

Alternatives to fair credit loans

If loan offers come with sky-high interest rates or repayment periods that make the loan payments unaffordable, it’s not worth stretching your budget thin to cover monthly payments. And you could do more harm than good if you default on the loan, as you’ll damage your credit rating.

Instead, consider alternatives to personal loans:

• Credit cards: If flexible, repeated borrowing best meets your needs, a credit card may be a better solution. However, credit cards typically have higher interest rates than personal loans if you carry a balance from month to month. And because credit card interest compounds, it adds up fast.
• Salary advances: If you need a small amount of money in the short term, you may be able to use a salary advance. Early payday apps allow you to access part of a future paycheck in advance. Remember, this means your future paycheck will be smaller than usual, which may cause cash flow problems and lead to a cycle of borrowing.
• Home equity loan or HELOC: If you own a home and have enough equity, you may be able to get a home equity loan or HELOC secured by your home. Your rates and approval depend less on your credit score and more on the amount of equity you’ve built. But if you fail to repay a home equity-secured loan, you could lose your house.

Bottom line

It’s possible to get a personal loan with fair credit if you need money immediately and lack the time needed to improve your scores before applying. Some lenders even specialize in bad- to fair-credit lending. Compare offers from at least three lenders to find the loan with the most competitive interest rate and fewest fees.

Frequently asked questions about fair-credit loans

• How big of a loan can I get with fair credit?

• Can I get a loan with a 600 credit score?

• What is the lowest credit score needed to get a personal loan?